Every LLC organized in Texas or doing business in the state owes the Texas LLC franchise tax, an annual obligation administered by the Texas Comptroller of Public Accounts. For the 2026 report year, LLCs with total revenue at or below $2.65 million owe nothing but still have to file an information report to stay in good standing. LLCs above that threshold pay tax on their margin at 0.375% or 0.75%, depending on industry. Reports are due May 15.
Which LLCs Have to File
Texas Tax Code Section 171.001 imposes the franchise tax on every taxable entity chartered or organized in Texas or doing business in the state,1State of Texas. Texas Code TAX 171.001 – Tax Imposed and Section 171.0002 names limited liability companies specifically in its definition of taxable entity.2State of Texas. Texas Code TAX 171.0002 – Definition of Taxable Entity Two groups are covered: domestic LLCs formed under the Texas Business Organizations Code, and foreign LLCs formed elsewhere but operating in Texas.
Physical presence, such as employees, inventory, or an office, creates a filing obligation. So does economic nexus. An LLC with no physical footprint in Texas still has nexus if it generates significant gross receipts from Texas customers, and the Comptroller reads that broadly. If Texas is a meaningful revenue source, assume you have nexus.
Series LLCs are treated as a single entity for franchise tax. The entire series files one report and one Public Information Report under one taxpayer number; if any individual series has nexus in Texas, the whole series has nexus.3Texas Comptroller of Public Accounts. Franchise Tax Frequently Asked Questions – Taxable Entities Owners who assume each series files separately end up with missing reports.
The $2.65 Million No-Tax-Due Threshold
For the 2026 and 2027 report years, the no-tax-due threshold is $2.65 million in annualized total revenue.4Texas Comptroller of Public Accounts. Franchise Tax LLCs at or below that number owe zero tax. There is also a second safety net: if the computed tax comes out to less than $1,000, you owe nothing regardless of revenue.5State of Texas. Texas Tax Code 171.002 – Rates; Computation of Tax
Owing no tax does not excuse you from filing. Starting with the 2024 report year, LLCs under the threshold no longer submit a No Tax Due Report, but they still must file a Public Information Report or Ownership Information Report every year.6Texas Comptroller of Public Accounts. No Tax Due Reporting for Report Year 2024 and Later The Comptroller treats a missing information report the same as a missing tax payment when deciding whether to forfeit an entity. This is where most small LLCs get into trouble.
How the Tax Is Calculated When You Owe
The franchise tax is a margin tax, not an income tax. You start with total revenue, apply one of four deduction methods to reach taxable margin, and then apply the rate. You get to pick whichever method produces the lowest margin.7Texas Comptroller of Public Accounts. Franchise Tax Overview
- 70% of total revenue, applied automatically with no itemization.
- Total revenue minus cost of goods sold, useful for businesses with heavy material or production costs.
- Total revenue minus compensation, useful for service businesses with significant payroll. For the 2026 report year, the per-person compensation deduction is capped at $480,000.8Texas Comptroller of Public Accounts. 2026 Texas Franchise Tax Report Information and Instructions
- Total revenue minus $1 million, a flat deduction available to any filer.
Under Section 171.101, your margin can never exceed 70% of total revenue, even if the COGS or compensation math would put you higher.9State of Texas. Texas Tax Code 171.101 – Determination of Taxable Margin Run all four before filing. The gap between best and worst can be significant.
The rate depends on your industry:
- 0.375% for LLCs primarily engaged in retail or wholesale trade.
- 0.75% for all other taxable entities.
To qualify for the retail/wholesale rate, revenue from those activities has to exceed revenue from all other activities, and generally less than 50% of that retail/wholesale revenue can come from products you manufactured yourself.5State of Texas. Texas Tax Code 171.002 – Rates; Computation of Tax Restaurants are an exception to the self-production limit.
The E-Z Computation Option
LLCs with total revenue of $20 million or less can skip the margin math and elect the E-Z Computation, which multiplies apportioned total revenue by 0.331%.10Texas Comptroller of Public Accounts. Franchise Tax The trade-off is that you cannot claim credits or deductions beyond what that section specifically allows.11Texas.Public Law. Texas Tax Code 171.1016 – E-Z Computation and Rate For LLCs with thin margins or heavy deductions, the standard calculation usually wins. For LLCs with low overhead, E-Z Computation is simpler and sometimes cheaper.
Deadline, Forms, and Extensions
The annual report is due May 15. If that date falls on a weekend or holiday, it shifts to the next business day.10Texas Comptroller of Public Accounts. Franchise Tax Filing goes through the Comptroller’s Webfile portal.12Texas Comptroller of Public Accounts. File and Pay
Every LLC that files a franchise tax report must also submit a Public Information Report listing the current names, titles, term expiration dates, and mailing addresses for each officer, director, manager, or member as of the filing date.13Texas Comptroller of Public Accounts. Public Information and Owner Information Reports The PIR becomes part of the public record once processed by the Secretary of State.
Before you file, you will want your eleven-digit Texas Taxpayer Number,14Texas Comptroller of Public Accounts. Identify Taxpayer your federal income tax return for the reporting period (Form 1065 for partnerships, 1120-S for S corporations), and your accounting year start and end dates. Total revenue for franchise tax purposes is derived from federal return figures.
If you cannot make May 15, an automatic extension to November 15 is available, but only if you make a sufficient payment by the original deadline. You must pay either 100% of the tax reported on your prior-year franchise tax report or 90% of the tax that will be due on this year’s report.15Texas Comptroller of Public Accounts. Franchise Tax Extensions of Time to File The 100% option is off the table if your LLC just became subject to the franchise tax in the prior year, or if it was part of a combined group last year and is filing separately this year. Shortfall on the 90% option triggers penalty and interest back to the original due date.
Penalties for Filing Late
Penalties stack quickly once you miss the deadline:
- 1 to 30 days late: 5% penalty on the tax due.
- More than 30 days late: 10% penalty on the tax due.
- After the Comptroller issues a notice of tax due: an additional 10%, bringing the total to 20%.
Interest starts accruing on the 61st day after the due date at a rate the Comptroller sets annually.16Texas Comptroller of Public Accounts. Penalties for Past Due Taxes
There is also a flat $50 late filing penalty on every report that comes in after the deadline, even when you owe no tax.16Texas Comptroller of Public Accounts. Penalties for Past Due Taxes That fee catches no-tax-due LLCs off guard every year. You can owe zero franchise tax and still get billed $50 for filing your PIR late.
What Happens If You Ignore It
If your LLC fails to file a required report or pay tax within 45 days after the Comptroller mails a forfeiture notice, the Comptroller forfeits the entity’s right to transact business in Texas.17State of Texas. Texas Tax Code 171.251 – Forfeiture of Corporate Privileges A forfeited entity cannot sue in Texas courts, and its account status will show as not in good standing, which blocks real estate closings, bank loans, and professional license renewals.18Texas Comptroller of Public Accounts. Franchise Tax Account Status
The personal exposure is what makes forfeiture serious. Section 171.255 makes every director and officer personally liable for debts the entity creates or incurs after the forfeiture date, treating them as if they were partners in a partnership.19State of Texas. Texas Tax Code 171.255 – Liability of Director and Officers LLC managers and officers face the same practical risk, and that liability does not go away when the entity is reinstated. Debts incurred during the forfeited window stay with the individuals in charge at the time.
Getting Reinstated
Reinstatement requires clearing your entire franchise tax history: every missing franchise tax report and Public Information Report filed through the reinstatement date, and all outstanding tax, penalties, and interest paid.20Texas Comptroller of Public Accounts. Tax Clearance Letter Request for Reinstatement Once you are current, the Comptroller issues a Tax Clearance Letter, which the Secretary of State requires to reinstate the entity. You can request the clearance letter through Webfile or by filing Form 05-391 along with any delinquent reports and payments. For years when the LLC was below the no-tax-due threshold, the only filing needed is the Public Information Report or Ownership Information Report for that year.
Checking Your Franchise Tax Account Status
After your report is filed and any tax paid, the Comptroller updates its records. You can verify your standing anytime through the Franchise Tax Account Status search on the Comptroller’s website. Results are printable and reflect the Comptroller’s records at the moment you run the query.18Texas Comptroller of Public Accounts. Franchise Tax Account Status Lenders, title companies, and licensing agencies check this before approving transactions, so it is worth confirming your status is current before a closing or renewal date rather than after.